In an appeal to the Full Federal Court by the taxpayer from the decision of Heerey J - who had held that the Commissioner was correct in assessing the taxpayer to FBT in respect of loan repayments made by the taxpayer to its shareholders who were its sole employees - the Commissioner conceded that the appeal should be allowed and agreed that the loan repayments were not benefits provided by the taxpayer "in respect of employment". This belated concession was consistent with the original decision of the AAT, from whose decision the Commissioner had successfully appealed to the Federal Court (Heerey J) in seeking to uphold his erroneous assessment.

In agreeing with the Commissioner's concession, the Full Federal Court said at paras 9 and 10:

"9 The Commissioner’s position on the appeal to this Court, namely, that he should agree to the appeal being allowed, is, in our view, undoubtedly correct. In our view, there is real doubt as to whether the repayment of a loan, in whole or in part, is a ‘benefit’ as defined in subs 136(1) of the FBT Act, as distinct from the discharge, in whole or in part, of a pre-existing right, and it would not seem to be encompassed by the terms of para (c) of the definition. Even if it is, there is also real doubt as to whether it can ever constitute a ‘fringe benefit’ as defined in the same provision, even with assistance of subs 148(1) of the FBT Act. The reasons which underlie the Commissioner’s agreement that the appeal should be allowed are supportive of our view on the ‘fringe benefit’ issue.

10 Finally, we would observe that our views on these issues are consistent with the policy and purpose underlying the fringe benefits tax legislation of which the FBT Act forms an integral part. Fringe benefits tax was only ever intended to tax the provision of benefits where, if the benefit had been provided in cash, there would have been a derivation of income. It is true that it was also the policy and purpose of the legislation to tax benefits which might not be income of the employee because the benefit was provided to an associate of the employee or because the benefit could not be converted into money. But it was never intended to apply to a repayment of a loan made by an employee to his employer; such a repayment could never be a derivation of income by the lender/employee."